This paper draws on five waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) and estimates a conditional fixed effects logit model to investigate the effects of housing equity constraints and income shocks on owner-to-owner residential moves in Japan. By looking at contemporaneous extended Loan-to-Value (ELTV) and extended Debt-to-Income (EDTI) ratios under the recourse loan system, we examine whether housing equity constraints and negative income shocks deter owner-to-owner residential mobility and whether government policy aimed at addressing equity constraints under the recourse loan system has an impact on residential moves. The specific policy we examine is the implementation of the income tax deduction system that permits the carrying over of capital losses for owner-occupied households. These tax policies were devised to cope with the severe equity constraints that followed the bursting of Japan's asset Bubble in the early 1990s. Simulation analysis of relaxing tax deduction conditions shows that changing the required years the household must live in the residence to qualify for the tax break before selling from 5 years to 1 year greatly enhances the mobility for both positive and negative equity households. Finally, simulation analysis of switching from the present recourse loan system to the non-recourse loan system shows an increase in the owners' mobility to another owner-occupied housing, especially for positive equity households.